BSP tightens buy-in limit on financial institutions

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has tightened transactions involving the acquisition of shares in Philippine banks, pawnshops, money service businesses including remittance and transfer companies, money changers, as well as foreign exchange dealers.

In a draft circular, the BSP said prior approval of the Monetary Board is now required on transactions resulting in ownership or control of at least 10 percent of the voting shares of a bank, pawnshop, and money service business by any person, enabling such person to elect or be elected as a director of the financial entity.

The current threshold on the acquisition of a stake in a Philippine bank, pawnshop and money service business requiring BSP approval is 20 percent.

The BSP said the request for prior Monetary Board approval should be submitted jointly by the transferor-stockholder and the transferee-stockholder within 60 calendar days from the date of transaction or 30 calendar days from the corporate secretary’s receipt of the request for registration of the transaction, whichever is earlier.

The regulator also said a bank should not recognize the fund infused by the subscriber in its book as assets and liability or equity unless prior Monetary Board approval is obtained.

“Transfers of voting shares of stock without the required approval of the Monetary Board shall have no legal effect; hence, shall not be recognized in the books of both the transferor and the transferee. Transferee-stockholders shall not assume actual control or management of the bank concerned without prior Monetary Board approval,” the BSP said.

It added any transaction involving voting shares of stock of a bank, if such transaction in itself or in relation with other or previous transactions would result in the ownership and control by an individual or corporation of voting shares of stock in excess of any of the prescribed limits of stockholdings in a bank, is unlawful and void.

“Any transfer or acquisition, or a series thereof, of at least 10 percent of the voting shares of stock of banks without prior BSP approval, which shall have no legal effect nor shall the same be recognized in the books, and any transfer of actual control or management of the bank to new stockholders or their representatives prior to such approval shall subject the transferor, the transferee, and any other person responsible liable to sanctions set forth in the pertinent laws and regulations,” the BSP said.

Furthermore, the central bank said only individuals and corporations that are fit and proper should be allowed to own voting shares of stock of banks.

In determining whether an individual or corporation is fit and proper to own voting shares of stock of banks, the regulator said individuals and corporations should have integrity or probity, reputation and financial capacity.

“Individuals and corporations owning voting shares of stock of banks are expected to be fit and proper to hold such shares on a continuing basis,” it said.

The BSP is asking the corporate secretary of these institutions to report any information affecting the continuing fitness and propriety of substantial shareholders within 24 hours from the time of discovery of the adverse information with the final report to be submitted within five banking days from the date of the preliminary report.

In the case of foreign banks, the BSP said prior authority of the Monetary Board is required whenever acquiring or transferring at least 10 percent of the voting stock of a domestic bank. The current threshold is more than 40 percent of the voting stock.

The regulator warned that it would deploy enforcement actions to promote adherence with the requirements in the proposed guidelines and bring about timely corrective actions, without prejudice to the appropriate legal actions for the rescission and invalidation of the transaction.

“The willful delay of the submission of request for Monetary Board approval, transfer of actual control or management of the bank without prior BSP approval, acting in the interest of an unregistered stockholder, and all other violations shall be subject to the applicable sanctions,” it said.